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Pandemic Plays Are Mixed as Shopify Soars, Pinterest Plunges

By Dan Caplinger - Updated Apr 28, 2021 at 12:45PM

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The market was on edge as investors prepared for the latest from the Federal Reserve.

Wednesday morning brought a mixed picture to Wall Street, as different stock market benchmarks moved in different directions. Investors expect to hear from Jerome Powell, chair of the Federal Reserve, this afternoon after the central bank's monetary policy committee concludes its April meeting.

With nervousness about rising interest rates and the future course of the economy, stocks hit turbulence. As of 11:30 a.m. EDT today, the Dow Jones Industrial Average (^DJI 0.23%) had lost 119 points to 33,866. The S&P 500 (^GSPC 0.36%) had managed to inch up 5 points to 4,191, but the Nasdaq Composite (^IXIC 0.00%) gave back early gains and fell 27 points to 14,064.

The pace of earnings releases has accelerated in recent days, and this week has been a big one for companies that were able to take advantage of conditions during the pandemic last year to foster growth. Shopify (SHOP -2.82%) was able to keep up its positive momentum on strong results, but investors in social media company Pinterest (PINS -2.47%) weren't as fortunate. Below, we'll look at both reports to see what they say about the future for pandemic stock plays in 2021 and beyond.

Shopify is still on top

Shares of Shopify were up more than 10% Wednesday morning. Investors were pleased at what the e-commerce-enabling platform provider was able to accomplish to start out 2021.

Shopify's first-quarter results were just as impressive as what investors have seen in previous quarters. Revenue more than doubled, falling just under the $1 billion mark for the period. Gross merchandise volume sold by Shopify clients gained 114% to $37.3 billion, and that helped drive revenue from the merchant solutions segment up 137%, while subscription solutions enjoyed healthy 71% growth. Shopify is also seeing strong results on the bottom line, as adjusted net income skyrocketed 11 times to $254.1 million, which worked out to $2.01 per share.

Shopify logo with green S bag.

Image source: Shopify.

The company celebrated several milestones, including the ongoing development of its Shopify Fulfillment Network, the all-in-one mobile shopping assistant Shop, and new point-of-sale offerings to facilitate commerce. Shopify also sees good times ahead, and while it doesn't think 2021 will be able to match the growth it saw in 2020, it nevertheless expects faster growth than in any year before that.

Investors already had high expectations for Shopify, so today's move higher is particularly notable. The strength of its business model could drive gains well into the future.

Losing interest in Pinterest?

Meanwhile, Pinterest shares were down 13%. The image-centered social media company's results from late Tuesday indicated a solid business, but they didn't satisfy shareholders looking for even more growth.

Pinterest's numbers were indeed impressive. Revenue jumped 78% from year-ago levels, and the company managed to reverse a year-ago loss with adjusted net income of $78.5 million. Pinterest saw monthly active user counts jump by 111 million worldwide to 478 million, with 37% growth internationally. Average revenue per user also moved upward by 34%, led by a 50% gain from U.S. users.

Yet investors seemed to focus on some of the weaker areas of Pinterest's business. User growth in the U.S. market slowed to just 9%, with an additional 8 million people using the service actively on a monthly basis. And although international user growth has been impressive, Pinterest's monetization of those users remains far below what it gets domestically. Even with revenue per user doubling internationally, U.S. users generate more than 15 times as much in sales on average as the typical user abroad.

What this quarter's results are showing is that strong performance isn't enough to guarantee share-price gains. With many stocks already having vaulted upward over the past 12 months, the bar is higher for high-flying companies to show they can keep thriving even once the pandemic is under control.

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Stocks Mentioned

Shopify Inc. Stock Quote
Shopify Inc.
$33.04 (-2.82%) $0.96
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$31,037.68 (0.23%) $69.86
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
$3,845.08 (0.36%) $13.69
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
$11,322.24 (0.00%) $0.00
Pinterest Stock Quote
$19.73 (-2.47%) $0.50

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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